11 Jun 2018

Things to Consider Before Downsizing Your Home

Buying a new home to downsize has a number of benefits. A smaller home means a smaller mortgage, less cleaning and maintenance, more affordable utility bills, and lower stamp duty.

The financial benefits of downsizing your home are obvious but are you really ready to commit to a smaller house with less space? Here are the top questions you need to ask yourself before downsizing:

Why are you downsizing?                                               

The reason for downsizing will vary from person to person. Are you downsizing to save money? Are you downsizing because you’re travelling more often because of work? Or is it because you feel like your current house is too big for your needs? Understand the reason why you are downsizing so you know if you are making the right decision.

How small can you go?

If you’ve been living in a four-bedroom house for a long time you will have gotten used to the large amount of space. Are you now considering moving to a one-bedroom or two-bedroom unit? Make sure to figure out how many square metres you can work with and if the space you are moving to can accommodate all the stuff you need.

The floor plan should be the top priority when choosing a smaller house. Check for houses that have an adequate amount of storage and take measurements of the space to make sure that the furniture and things you need can fit into the new space.

Where do you plan on moving?

Some downsizers move from a suburb to somewhere in the heart of the city. Downsizing makes it more affordable to live near your workplace or the CBD or somewhere with sought after amenities such as shopping hubs, restaurants, and parks.

Some downsizers also plan on leaving their large suburban home to move into a small town to have a quiet and peaceful place to live. Make sure to factor in your needs and wants when choosing a smaller home to move into.

Do you plan on selling your old items?

If you downsize you won’t be needing all your things anymore. It may be hard to let go of the sentimental things you have acquired over the years, but you will eventually need to let go when downsizing. Decide on what stuff you will bring with you to your new home, so you can start selling or donating items you no longer need.

How much will you get after selling your current house?

When you sell your primary residence, there is no need to pay Capital Gains Tax (CGT). On the downside, you also can’t claim an income tax deduction for costs associated with selling your home. However, if you are selling a second property such as a holiday house, you may be subject to CGT.

Downsizing can be a good option to lower down your household expenses or for retirement. Don’t forget to budget for the moving expenses and renovations before you make the move to a smaller home. This will ensure that you’re getting your money's worth from downsizing.